Orosi Public Utility District v. McCuaig

The Orosi Public Utility District was organized under the provisions of an act providing for the incor

The act providing for the incorporation of public untility districts in unincorporated territory states that whenever electors equal in number to fifteen per cent of all the votes cast for all candidates for Governor within such unincorporated territory at the last preceding general election, at which a Governor was elected, desire to organize such a district, they shall sign a petition setting forth the boundaries of the proposed district, and present same to the board of supervisors of the county in which the unincorporated territory is situated. The board of supervisors shall, within fifteen days after the presentation of the petition, publish a copy thereof, together with a statement that the proposition involved therein, which shall be briefly specified, will be submitted by it to the qualified electors of the unincorporated territory at a special election, after publication of the required notice. Within five days after the result of the election is ascertained, if it appears that a majority of the votes cast is in favor of the incorporation of the district, the board of supervisors shall so declare, and shall in a proper order state the name and boundaries of the district, and that such utility district is formed under the provisions of the act {supra). After the date of the filing of certain certificates with the Secretary of State, the territory described in the petition shall be deemed incorporated as a public utility district, under the provisions of the statute, with all the rights, privileges, and powers set forth therein.

The act of 1921, as originally enacted, and as it stood when the respondent district was formed, did not provide for any notice of the hearing of the petition for the formation of the district. The property owners within the proposed district were not given an opportunity to protest against having their property included within its boundaries, nor were they accorded an opportunity to be heard as to whether their property was or could be benefited by being included within such boundaries. For that reason, the appellant takes the position that the act is unconstitutional and in contravention of the fourteenth amendment of the federal constitution, and contrary to similar provisions in the constitution of the state, in that it provides for a taking of his property without due process of law. It follows, he argues, that all proceedings taken for the organization of the district, and the subsequent proceedings relating to the issue of the bonds, which are dependent upon the validity of the organization of the district, are null and void, and, as a necessary consequence, the bonds sought to be validated by this proceeding are invalid. After the proceedings involved in this case were had, the act was amended (Stats. 1923, p. 299) to provide for a notice and a hearing by the board of supervisors of the petition for the formation of a utility district. It is now provided that the board must hear all competent and relevant testimony offered in support of, or in opposition to, the petition. It shall make such changes as it may deem advisable in, and shall define and establish the proposed boundaries. At the time the proceedings for the formation of the Orosi District were taken no discretionary power whatever was vested in any legislative body. Upon presentation of the petition therefor, the board of supervisors was compelled to immediately submit the question of the formation of the district to the voters residing within the described limits. The question whether or not the exact territory described in the petition should be included in, and constitute the utility district, was made to depend solely

It is not contended that any of the steps leading to the formal declaration by the board of supervisors of Tulare County that the respondent district was in fact created were omitted, or that they were not properly taken. The sole question to be determined on appeal relates to the constitutionality of the act under which the district was created. Our first consideration is, therefore, directed to the nature of the district which may be formed under its provisions. If it be one formed for the primary purpose of assessing upon the lands within its boundaries benefits to be derived by the lands from some public improvement for which purpose the district is created, we must hold with appellant, and declare the act unconstitutional as violating the "due process clause” of the federal constitution. Such districts can be legally created in but two ways, neither of which was followed in this case. [1] The legislature itself may create a district to be assessed for the benefit of a public improvement, and determine its boundaries, either by describing them or by laying down a fixed rule by which they may be determined. If it does so, the property owners are not entitled to a hearing on the question of benefits to the land included within the district, for they are conclusively presumed to have been heard through their representatives in the legislature. (Tarpey v. McClure, 190 Cal. 593 , 604 [ 213 Pac. 983 ]; Miller & Lux, Inc., v. Drainage Dist., 182 Cal. 252 , 265 [ 187 Pac. 1041 ]; Fallbrook Irr. Dist. v. Bradley, 164 U. S. 112 , 174 [ 41 L. Ed. 369 , 17 Sup. Ct. Rep. 56 , see, also, Rose’s U. S. Notes].) [2] Instead of creating the district by special act, the legislature may, by a general law, provide for its formation, and may delegate to some board, commission or tribunal the determination of what lands shall be included within its boundaries. In the event that the district be formed under such an act, the inquiry becomes judicial in its nature to such an extent that property owners are entitled to a hearing, or an opportunity to be heard, on the question of benefits before their lands are in

[4] The rule laid down in Fallbrook Irr. Dist. v. Bradley, supra, which has been so constantly adhered to by this court in its application to assessment districts formed for the purpose of assessing upon private lands the benefits to accrue from the particular public improvement for the construction of which the district was formed (Miller & Lux v. Board of Supervisors, 189 Cal. 254 , 267 [ 208 Pac. 304 ]), does not apply to every kind of public or quasi-public corporation. There is an obvious distinction to be drawn between an act providing for the formation of an assessment district, and which practically authorizes property owners, without notice, to place burdens on the property of others for the sole purpose of improving their own property, and an act providing for the formation of a quasi-municipal corporation or a municipality. (People v. Ontario, 148 Cal.

[5] The purposes for which the Orosi District was formed, the appellant contends, are not municipal, and a district formed for such purposes does not possess the essential characteristics of a municipal corporation. If the authorities cited by him were strictly in point, there would be an end to the controversy; but they are not. They deal with questions arising in connection with districts formed for the purpose of draining, irrigating, reclaiming, or otherwise directly benefiting the lands affected thereby. (People v. Reclamation Dist. No. 551, 117 Cal. 114 , 121 [ 48 Pac. 1016 ] ; People v. Levee Dist. No. 6, 31 Cal. 30 , 34 [ 63 Pac. 676 ]; People v. Sacramento Drainage Dist., 155 Cal. 373 , 382 [ 103 Pac. 207 ] ; Pixley v. Saunders, 168 Cal. 152 , 160 [ 141 Pac. 815 ]; In re Werner, 129 Cal. 567 , 572 [ 62 Pac. 97 ].) When

Districts of the nature just discussed are not municipal corporations in the contemplation of the constitution. (People v. Sacramento Drainage Dist., supra, p. 382; Declamation Dist. No. 551 v. County of Sacramento, 134 Cal. 477 , 478 [ 66 Pac. 668 ].) [6] But the provision in article XI, section 6, that “corporations for municipal purposes shall not be created by special laws” does not imply that the legislature must, by any general law, provide a plan in which shall be prescribed the mode under which all municipal corporations must be organized and the powers they can exercise. Of interest in this connection is the language of the court in In re Madera Irr. Dist., 92 Cal. 296 [ 27 Am. St. Rep. 106 , 14 L. R. A. 755 , 28 Pac. 272 ], where, at page 317, it says: “Such, corporations are but the agents or representatives of the state in the particular locality in which they exist. They are organized for the purpose of carrying out the purposes of the legislature in its desire to provide

[7] With this power of the legislature understood, the nature of the districts contemplated by the act under which the Orosi Public Utility District was created is more clearly discerned. In 1911 the constitution of California was amended to provide that “any municipal corporation may establish and operate public works for supplying its inhabitants with light, water, power, heat, transportation, telephone service, or other means of communication. Such works may be acquired by original construction, or by the purchase of existing works, including their franchises, or both.” (Const., art XI, sec. 19.) The amended section is radically different from the one it replaced. In the statement of legislative reasons for the adoption of the amendment, printed and transmitted to the voters by the Secretary of State, it is stated that the conditions which prevailed in this state with regard to the operation of public utilities in cities at the time of the adoption of the new constitution of 1879 had materially changed, and an entirely new situation existed regarding the subject to which the section related. “The proposed amendment,” the statement continues, “is designed to provide for conditions as they now are, and as they will doubtless continue to be in the future.” After a discussion of the situation arising during the period following 1879, and a declaration that the result “has been a distinct disappointment, like many other attempts to remedy economic conditions by force of statutes, . . . the true remedy, so far as any substantial benefit to the people is concerned; ’ ’ the statement declares, “is to encourage the furnishing of these public necessities by municipal corporations themselves.” The adoption of the amendment definitely settled and removed all doubt from the question of the right of cities and towns to own and operate the kind of public utilities designated by the constitution. [8] In enacting the statute here in question, the legislature has made provision whereby the inhabitants of the state living outside the limits of cities and

That such was the intention of the legislature may he gleaned from a reading of the provision declaring the purposes for which public utility districts may be created in unincorporated territory. They are the acquisition, construction, and use of works for supplying the inhabitants of the district "with light, water, power, heat, transportation, telephone service, or other means of communication, or means for the disposition of garbage, sewage, or refuse matter. It has the power to do all things necessary or convenient to the full exercise of the powers granted by the act. It is significant that, when the legislature came to pass the act extending to the inhabitants outside of incorporated cities and towns the privileges in regard to the acquisition and use of their own public utilities that are granted by the state constitution to municipalities, it should have followed so closely the language of the constitutional amendment of 1911 in the statement of the purposes for which the districts may be created. We are convinced that it was its intention to provide for the creation of public corporations of a quasi munieipal character, with power to carry on the particular functions committed to them.

“A city or purely municipal corporation is perhaps the highest type of corporation created for municipal purposes, because it is a miniature government, having legislative, executive and judicial powers, but there is another class of corporation, such as counties, school districts, road districts, etc., which, though varying in application and peculiar features, are but so many agencies or instrumentalities of the state to promote the convenience of the public at large, and are, in the broadest use of the term, for municipal purposes. ’ ’ (Cook v. Port of Portland, 20 Or. 580 , 583 [ 13 L. R. A. 533 , 27 Pac. 263 ].) [9] It is not necessary, therefore, that a district like the Orosi Public Utility District shall exercise all the powers of local .self-government which usually pertain to municipal corporations. All that was required was that the legislature should vest them, when properly organized, with such governmental powers as in its judgment were necessary to be exercised and appropriate to carry out the purposes for which the districts may have

[10] The creation of municipal corporations does not have for its sole object the formation of political subdivisions of the state for governmental purposes, but there is also the association of the members of the particular community for the administration of their local business and affairs in matters largely outside of the sphere of government as such. (Union Stone Co. v. Board of Freeholders of Hudson Co., 71 N. J. Eq. 657 , 664 [ 65 Atl. 466 , 469]. See, also, Wilson v. Board of Trustees, 133 111. 443, 464 [ 27 N. E. 203 ].) It is quite apparent to us that the legislature had in view such association of the people living in the outlying districts, when it enacted the statute providing for the formation of public utility districts in the unincorporated territory of the state. It thereby provided for the creation of public agencies or quasi-municipal corporations, the declared purpose of the act being to extend to the inhabitants of such districts, when properly organized, advantages in the use and benefit of certain utilities which they might not be able to obtain in any other way, and which, from common experience, we know tend to promote the general welfare of the people of the state. That it had the power to do so cannot be denied. While the proposed constitutional amendment was pending in 1911, this court held that there was no provision in the state constitution which either expressly or by implication forbade the acquisition, ownership, or operation of public utilities by a municipality, or which prohibited the legislature from granting a municipality the power to acquire, own, and operate them. (Clark v. Los Angeles, 160 Cal. 30 , 46 [ 116 Pac. 722 ].) Activities, once regarded as being of a strictly private nature, are now considered municipal affairs, e. g., the sale and distribution of electrical energy manufactured by a city, the supplying of water to its own inhabitants or to outside territory, the construction of a reservoir by a city on its own land and to be used for the benefit of its inhabitants, and the establishment and operation of transportation service. (Los Angeles G. & E. Corp. v. Los Angeles, 188 Cal. 307 , 317 [ 205 Pac. 125 ] ; Heilbron v. Sumner, 186 Cal. 648 , 651 [ 200 Pac. 409 ]; South Pasa

[11] We take it to be now a generally accepted proposition that, while a municipality, which undertakes to supply those of its inhabitants who will pay therefor with utilities and facilities of urban life, is performing a function not governmental, but more often committed to private corporations or persons with whom it may come into competition, it is, in fact, engaging in business upon municipal capital, and for municipal purposes. (28 Cyc. 125.) Any tax, therefore, levied and collected for the purpose of supplying such municipal capital is not a tax or assessment on property directly benefited by the construction of some local improvement, but is a general tax levied just as, and for the same purpose that, any general municipal tax is imposed for carrying on the governmental functions and utilitarian objects of duly incorporated cities or towns.

The conclusion we have reached, on the general consideration of the act under which the respondent district was formed, is confirmed by an examination of the provision of the statute relating to the necessary revenue for conducting the affairs of such public corporations. It is provided (section 38) that only revenue-producing utilities shall be acquired, owned, or operated, “the intention being . . . that each public utility owned and operated by the district shall be self-sustaining.” To that end, it is provided that, so far as possible, the board of directors shall fix such charges for commodities or service furnished by its revenue-producing utilities as will pay the administrative expenses of the government of the district, the operating cost of the utilities, the interest on any bonded indebtedness, and, in addition, provide a sinking fund for the retirement of the principal of the debt, and an appropriate fund for repairs, replacements and betterments. These provisions clearly establish the contention that the essential purpose of the act is to form a quasi-municipal corporation which may acquire and operate public utilities and pay for their operation from

[12] From our conclusion that the act, under which the respondent district was created, provides for the formation of a public or quasi-municipal corporation, the inhabitants and property owners of which are subject to tax by the district for municipal purposes only, it follows that the attack here made on the constitutionality of the act must fail. The public utility districts provided for by its terms have as their sole purpose the welfare and prosperity of the people of the state—matters which rest within the will of the people themselves. In People v. Town of Ontario, 148 Cal. 625 [ 84 Pac. 205 ], this court considered the constitutionality of the act providing for the annexation of territory to incorporated towns and cities. (Stats. 1889, p. 358.) By the terms of the act, upon receipt of a proper petition, signed by the requisite number of electors of the municipality and exactly describing the territory desired to be annexed, the legislative body of the municipality is compelled to submit the question of annexation to the electors of the town, and also to those of the outside territory. No notice, or opportunity to be heard on the question, is afforded residents or property owners of either the town or the ter

[13] In the instant ease the district has been formed within the strict letter of the law, and in the manner provided by the legislative enactment. We have been cited to no authorities which hold that the requirement as to due process of law gives a property owner an absolute right to notice and hearing before his property may be included within the limits of a municipality or a quasi-municipal corporation, by reason of the creation of which his property will be subjected only to the burden of a general tax for the purposes for which the district was formed, in contradistinction to a tax or assessment for some local benefit. Appellant was not, therefore, entitled to notice and opportunity to be

We deem it unnecessary to further discuss the decisions of this court and those of other jurisdictions so strongly relied on by appellant. Many of them have already been referred to and their distinguishing features pointed out. We have carefully examined every one of them, and many others, and have not found one that is exactly in point. The reason for the dearth of precise judicial decision on the important question we have been called on to decide in this case is that public utility districts are new to the law of California, and the furnishing of what may be called public utility service is an extension of municipal functions of comparatively recent times. After a critical study of the authorities, we have found nothing that destroys our confidence in the conclusion we have reached in this case. The ease cited by appellant, and which, on first reading, seems nearest in point to the question here involved (People ex rel. Amestoy Estate Co. v. Van Nuys Lighting Dist., 173 Cal. 792 [Ann. Cas.

Myers, C. J., Seawell, J., Richards, J., Shenk, J., Lawlor, J., and Lennon, J., concurred.